Commissioner Of Income Tax (Central), Gurgaon v. M/S M.r. Education Society, Faridabad

ITA-291-2014 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-291-2014 Date of Decision: 16.1.2019 Commissioner of Income Tax (Central), Gurgaon Versus ....Appellant. M/s M.R. Education Society, Faridabad ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Tajender K. Joshi, Sr. Standing Counsel for the appellant. Mr. S.K. Mukhi, Advocate for the respondent. *** AJAY KUMAR MITTAL, J. 1.This order shall dispose of a bunch of three appeals bearingITA Nos.291, 411 and 429 of 2014 as according to learned counsel for theparties, similar and connected issues are involved therein. For brevity, thefacts are being extracted from ITA-291-2014. 2.ITA-291-2014 has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 30.4.2013 (Annexure A-3) passed by the Income Tax AppellateTribunal, Delhi Bench 'E', New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 5075/Del/2012. The appeals were admitted by thisGURBACHAN SINGH2019.03.19 12:49Court vide order dated 13.5.2015 for determination of the substantialI attest to the accuracy andintegrity of this document ITA-291-2014 questions of law as raised in para 15 of the appeals which are as under:-ITA-291-2014 (i)Whether on the facts and in the circumstances ofthe case, the learned ITAT was right in law inallowing the exemption under Section 11 of theAct which was disallowed by the AO as theassessee had not applied 85% of additional incomeof ` 80,01,470/- to charitable or religious purposein relevant previous year and that further appeal isalso filed on the addition of ` 80,01,470/-?the case, the learned ITAT was right in law inallowing the exemption under Section 11 of theAct which was disallowed by the AO as theassessee had not applied 85% of additional incomeof ` 80,01,470/- to charitable or religious purposein relevant previous year and that further appeal isalso filed on the addition of ` 80,01,470/-? (ii)Whether in the facts and circumstances of the casethe impugned order dated 30.04.2013 (Annexurethe impugned order dated 30.04.2013 (Annexure A-3) passed by ITAT affirming the order dated24.07.2012 (Annexure A-2) passed by CIT(A)deleting the additions of ` 40,50,850/- of corpusdonation and disallowance of ` 39,50,621/- onaccount of excess of income over expenditure arenot perverse and unsustainable in all regards?24.07.2012 (Annexure A-2) passed by CIT(A)deleting the additions of ` 40,50,850/- of corpusdonation and disallowance of ` 39,50,621/- onaccount of excess of income over expenditure arenot perverse and unsustainable in all regards? ITA-411-2014 Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in allowing theexemption under Section 11 of the Act which wasdisallowed by the AO as the assessee had not applied85% of additional income of ` 1,78,01,645/- to charitableor religious purpose in relevant previous year and thatfurther appeal is also filed on the addition of ITA-291-2014 -3- ` 1,78,01,645/-? ITA-429-2014 ITA-411-2014 Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in allowing theexemption under Section 11 of the Act which wasdisallowed by the AO as the assessee had not applied85% of additional income of ` 1,78,01,645/- to charitableor religious purpose in relevant previous year and thatfurther appeal is also filed on the addition of ITA-291-2014 -3- ` 1,78,01,645/-? ITA-429-2014 Whether on the facts and in the circumstances of thecase, the learned ITAT was right in deleting the penaltyimposed by the A.O. under Section 271(1)(c) of the I.T.Act on account of exemption under Section 11(2) beingdenied to the assessee due to the fact that the assesseehad received voluntary contribution and not shown asincome earned by the assessee considering the provisionof Section 2(24) of the Act when registration underSection 12AA was cancelled by the CIT(C), Ludhiana?3.A few essential facts in ITA-291-2014 as narrated therein maybe noticed. The assessee was granted registration under Section 12AA ofthe Act by the Commissioner of Income Tax, Faridabad. A search andseizure operation under Section 132 of the Act was conducted at the officialpremises of the assessee as well as the residential premises of the trustees on4.8.2005. During the course of search, unexplained assets as well asincriminating documents were seized. The proceedings under Section12AA(3) of the Act were initiated. The Commissioner of Income Tax(Central), Ludhiana [in short “the CIT(C)”] vide order dated 30.1.2008cancelled the registration granted to the assessee under Section 12AA of theAct. A corrigendum was issued vide order dated 1.5.2008 by the CIT (C),Ludhiana to make the order under Section 12AA(3) of the Act effectivefrom 1.10.2004. The assessee filed an appeal before the Tribunal againstthe cancellation of registration who vide order dated 15.2.2010 set aside thesaid order and remanded the matter back for fresh consideration. During the ITA-291-2014 scrutiny of the income tax return for the assessment year 2005-06 of theassessee, the Assessing Officer found that the assessee had receiveddonations amounting to ` 40,50,000/- and had not included the said amountin its declared income. Thereafter, the case of the assessee was reopenedunder Section 147 of the Act and a notice dated 9.7.2009 under Section 148of the Act was issued to the assessee. In response thereto, the assessee filedits return of income on 7.8.2009 declaring the income as 'nil'. A notice dated23.9.2009 under Section 143(2) of the Act was issued to the assessee. TheAssessing Officer vide order dated 23.12.2010 (Annexure A-2) held that theassessee had declared in its income and expenditure account, income overexpenditure amounting to ` 39,50,621/- which was also liable to be taxed asthe assessee had not been granted registration by the CIT(C), Ludhiana. TheCommissioner of Income Tax (Appeals) [CIT(A)] deleted the additionwhich order had been upheld by the Tribunal. ITA-411-2014 relates toquantum addition made for the assessment year 2006-07 whereas ITA-429-2014 seeks restoration of penalty imposed under Section 271(1)(c) of theAct which had been deleted by the CIT(A) and the Tribunal. Hence, thepresent appeals by the revenue. 4.We have heard learned counsel for the parties. 5.The Tribunal while allowing the appeal bearing ITA No.5075/Del/2012 as impugned by the revenue in ITA-291-2014 had noticedthat since the assessee had been granted registration under Section 12AA ofthe Act, therefore, its income had to be computed by giving benefit ofSections 11 and 12 of the Act. The assessee had fulfilled the conditions asprovided in Sections 11 and 12 of the Act. In the regular assessment, theGURBACHAN SINGHincome of the assessee was determined at nil. The relevant findings2019.03.19 12:49I attest to the accuracy andintegrity of this document recorded by the Tribunal read thus:- 4.We have heard learned counsel for the parties. 5.The Tribunal while allowing the appeal bearing ITA No.5075/Del/2012 as impugned by the revenue in ITA-291-2014 had noticedthat since the assessee had been granted registration under Section 12AA ofthe Act, therefore, its income had to be computed by giving benefit ofSections 11 and 12 of the Act. The assessee had fulfilled the conditions asprovided in Sections 11 and 12 of the Act. In the regular assessment, theGURBACHAN SINGHincome of the assessee was determined at nil. The relevant findings2019.03.19 12:49I attest to the accuracy andintegrity of this document recorded by the Tribunal read thus:- “On due consideration of the facts and circumstances, weare of the opinion that assessee has been grantedregistration U/S 12AA, therefore, its income has to becomputed by giving benefit of Section 11 and 12.Section 11 of the Income Tax Act provides that subjectto Section 60 to 63 the income derived from propertyheld under trust wholly for charitable or religiouspurpose, to the extent to which such income is applied tosuch purpose in India; and where any such income isaccumulated or set apart for application to such purposein India to the extent to which the income so accumulatedor set apart is not in excess of 15% of the income fromsuch property; shall not be included in the total incomeof the previous year of the person who received suchincome. The assessee has fulfilled the conditionsprovided in Section 11 and 12 of the Income Tax Act.There was no dispute about these proposition even by theAssessing Officer, the grievance of the Assessing Officerwas that once registration was withdrawn, it cannot claimthe benefit of Section 11 and 12, otherwise in the regularassessment also the income of the assessee wasdetermined at nil.” 6.In ITA-411-2014, the Tribunal while upholding the order of theCIT(A) in ITA No. 5076/Del/2012 while deleting the addition of` 1,78,01,645/- had observed that the registration of the assessee was ITA-291-2014 cancelled vide order dated 23.12.2010 under Section 12AA(3) of the Act byrestoring the earlier order dated 31.1.2008 made effective from 1.10.2004.Further, it was held that nothing was produced on the record on the basis ofwhich the continuation of registration could be denied to the assessee as theadditions made by the Assessing Officer were deleted. The CIT, Central,Ludhiana, vide order dated 30.11.2008 after considering the activities of theassessee as genuine and the objectives as charitable had granted theregistration w.e.f. assessment year 2008-09. The Tribunal following thedecision of the Tribunal for the assessment year 2005-06 had allowed theappeal by noticing as under:- “The registration of the assessee trust was cancelled videorder u/s 12AA(3) dated 23.12.2010, restoring the earlierorder dated 31.1.2008 made effective from 1.10.2004.Now the Hon'ble ITAT has held that there was nothingon record on the basis of which the registration could becontinued to be denied to the assessee-trust as theimpugned additions made stood deleted. Reference hasbeen drawn to order dated 30.11.2008 of CIT, CentralLudhiana had afterwards considered the activities of thetrust as genuine and the objectives as charitable whilegranting the registration w.e.f. A.Y. 2008-09. A copy ofthe said order is placed on record, from which it isevident that the date of order of the CIT(C) Ludhianagranting the registration is dated 12.6.2008, and not30.11.2008 as mentioned in the order of the Hon'bleITAT. Therefore, respectfully following the decision of -7- the Hon'ble ITAT, the appeal of the assessee in GroundNo.4 and 5 is allowed.” 7.ITA-429-2014 arising out of ITA No. 5077/Del/2012 relates toimposition of penalty under Section 271(1)(c) of the Act for the assessmentyear 2007-08. The Tribunal while affirming the order of the CIT(A)deleting the penalty, had recorded as under:- -7- the Hon'ble ITAT, the appeal of the assessee in GroundNo.4 and 5 is allowed.” 7.ITA-429-2014 arising out of ITA No. 5077/Del/2012 relates toimposition of penalty under Section 271(1)(c) of the Act for the assessmentyear 2007-08. The Tribunal while affirming the order of the CIT(A)deleting the penalty, had recorded as under:- “The penalty has been deleted on the ground thatquantum addition stands deleted. Sub Section (iii) ofSection 271(1)(c) provides the computation of penalty. Itcontemplate that in cases referred to in clause (c) inaddition to tax, if any payable by an assessee, a sumwhich shall not be less than but while shall not exceedthree times, the amount of tax sought to be evaded byreason of concealment of particular of his income. Thus,what an assessee has to pay by way of penalty is anamount equivalent to the tax sought to be evaded or 3times of the tax sought to be evaded. Once additions aredeleted, then there is no amount on which assessee canbe said to have evaded the tax and, therefore, therecannot be any penalty. Ld. CIT(A) has observed thatadditions are deleted, the penalty cannot prevail. We donot find any reason to interfere in the order of Ld. CIT(A)...” 8.No illegality or perversity could be pointed out by the learnedcounsel for the revenue in the aforesaid findings recorded by the Tribunal inall the three appeals which may warrant interference by this Court. ITA-291-2014 Accordingly, the substantial questions of law are answered against therevenue and in favour of the assessee. The appeals stand dismissed. (AJAY KUMAR MITTAL) JUDGEJanuary 16, 2019(MANJARI NEHRU KAUL)gbsJUDGE Whether Speaking/ReasonedYesWhether ReportableYes